New supply chain operating model: Service oriented and agile

September 28, 2018

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According to industry research, today’s supply chains are moving toward a more growth-oriented focus. The number of executives saying that the supply chain should be a growth enabler has more than doubled between 2013 and 2016—from 14 percent to 34 percent.1 At the same time, 89 percent of executives believe current supply chain operating models are too complex to be effective and require simplification.2

To truly enable growth and provide competitive differentiation, the supply chain must become more responsive to customers. They now expect a wider selection of customized, reliable, and sustainable products, delivered as quickly as possible. This requires a more flexible and service-oriented supply chain operating model that can cost-efficiently provide highly personalized service down to the individual customer level.

What will this new customer-centric operating model look like? Accenture Strategy believes it will be based on three key characteristics: a total value-chain mindset, a boundaryless workforce, and growth-focused execution.

Total value-chain mindset

With an end-to-end customer experience focus, flexibility and agility become central in the new operating model design. An operating model oriented toward a set of services instead of the traditional supply chain functions enables a company to mobilize the right set of assets to uniquely fulfill each customer’s order. In fact, 83 percent of executives that we surveyed believe the supply chain will remove functional silos to enable internal cross-functional collaboration.3

Achieving this flexibility will require connectivity, both within the company as well as with external partners. This new operating model will rely on strong collaboration among hundreds of different ecosystem partners to ensure products and services get to the consumer’s door.

A focus on innovation will also play a core role in the value-chain mindset. Digital technologies offer myriad opportunities for companies to think differently about the supply chain and how it operates. But those opportunities will be wasted if companies lack an entrepreneurial drive to continuously look for ways to improve, experiment “on the go,” and increase value for customers.

Boundaryless workforce

The workforce is the centerpiece of any operating model, and that’s where the supply chain of the future will likely experience the most significant change. Today, most supply chain workforces are comprised of full-time employees, and the remainder are flex resources who provide operations support during periods of high demand.

Increasingly, we expect the workforce to be comprised of three distinct types of workers. There are “digital colleagues,” that will automate much of the day-to-day operations. These range from unsupervised technologies like robotics process automation, which handle repetitive tasks, to supervised, sentient artificial intelligence that will make increasingly sophisticated decisions on behalf of humans through continuous machine learning and algorithm tweaking.

A second type of worker is the traditional full-time employee—but with new types of roles. Ninety percent of executives we surveyed believe internal talent will be up-skilled and realigned to decision-centric roles.4 As machines take over the tactical supply chain activities, permanent employees will be responsible for optimizing customer value and driving innovation. They will fill such roles as “supply chain architects” that will design value chains and associated end-to-end customer-centric segments, and “orchestrators” that use advanced scenario-modeling and simulation to manage the end-to-end value chain.

Finally, there will be an on-demand workforce that goes beyond traditional third-party manufacturers and logistics providers. These resources will come from a talent ecosystem that provides specialized skills needed to address specific challenges—for example, analytics prowess to understand a product’s growth prospects in certain markets. The on-demand workforce will help a company become more agile and responsive without incurring overhead costs.

Growth-focused execution

In the new supply chain operating model, governance and performance management move away from the traditional siloed functional focus that predominates today. In their place will be new metrics that look at the outcome of every step in the value chain. For instance, the common practice of measuring a manufacturing facility’s utilization provides little insight into how that plant impacts the overall business. But what does work is a perfect order KPI that trickles down to a manufacturing facility level.

When put into practice, this new operating model will be underpinned by an extended ecosystem, as illustrated in the figure below, which is continuously orchestrated to meet customers’ needs. Importantly, what’s “behind the curtain” remains invisible to customers. They only see a company that gives them exactly what they want.

A single customer touchpoint, supported by a collaborative ecosystem

Source: Accenture Strategy, 2018

With customer expectations continuing to change rapidly, supply chains need to keep pace. Companies will need to start creating an agile operating model that can serve customers in both traditional and new channels, in both a cost-efficient but also tailored way. Driving this change now will avoid higher costs and market-share risk, but also finally turn the supply chain into the growth enabler executives expect it to be.